With 2018 fast approaching its end, market stakeholders will be eyeing the new year and the many opportunities it has in store. Conventional wisdom states that every trade should be approached with caution. The standard rules of engagement apply to all categories of financial assets – stocks, commodities, indices, and currency pairs.
For starters, traders should always maintain a journal of winning and losing trades. This serves as a blueprint for the future by plotting out tips, tricks and strategies that worked. Experts recommend conducting in-depth research of individual assets prior to investing in markets. A wealth of resources is available to traders in the form of real-time prices, news feeds, automated trading programs, webinars, seminars, financial analysis (technical and fundamental) etc. The quality of the information is paramount.
The Quality of the Trading Platform
Trading professionals from Wilkins Finance stress that clients should evaluate the quality of their chosen platforms before signing up and depositing money into their trading accounts. Mobile functionality is sacrosanct. The world’s leading brokers have fully optimized their product offerings to include Android and iOS functionality, allowing for instant trades on a wide range of asset categories. Typically, stocks are the most populous category, followed by currency pairs, indices and commodities.
Today, the leading platforms include MetaTrader 4, WebTrader, and various proprietary trading software designed to maximize the experience for clients. The availability of a demo trading account is especially useful for novices. With 2018 in our sites, it’s always a good idea to get a head start by registering at a respected broker and performing a number of demo trades under real market conditions.
How will Tax Reform Impact Businesses
Several important considerations must be borne in mind for 2019. For starters, the US Senate and the House passed comprehensive tax reform. While the bills differ somewhat, they are likely to result in dramatically reduced corporate taxes from the current rate of 35% to around 20%. This will boost the profitability of Wall Street enterprises, notably big banks like Wells Fargo, Citibank, Bank of America, J.P. Morgan, Goldman Sachs etc.
With lower corporate taxes, banks are likely to report higher levels of retained earnings. This should theoretically result in greater profit potential for investors. While the trickle-down effect may take time, it is a long-term investment strategy to follow. Additionally, traders will be eyeing earnings from major retailers after the holiday shopping period. Between Black Friday and Christmas Day, major retailers around the world will be generating a huge percentage of their profits.
The Volcker Rule
One of the things to look out for in the new year will be changes to the Dodd-Frank Financial Reform Laws. On 3 February 2017, US President Trump signed regulations ordering for a review of this important law. Simply put, the 2008 global crisis resulted in new laws regarding capital requirements for banks and financial institutions. By increasing the capital cushion needed by banks and tightening regulations, a recurrence of the 2008 global crisis can theoretically be prevented.
The US president believes that the US economy has improved significantly to allow for a relaxation of these capital cushion requirements. There are also other considerations including hedging and how banks buy/sell or hold their securities. This will invariably be good news for banks and traders will do well to hedge their bets on bank stocks moving forward.
Rebalancing Portfolios and Including Derivatives Assets
At the end of the year, investment analysts recommend a rebalancing of financial portfolios to reflect current market conditions. For example, poorly performing tech stocks could be sold off and written down as losses for tax purposes, and to make an investment portfolio look more attractive on paper.
Greater allocations could be assigned toward metals and industrials, domestic versus international stocks etc. Another viable option is derivatives trading whereby traders do not buy and hold assets – they simply speculate on price movements (up or down). This option should be regarded as a supplement to an overall plan, and not supplant it.